Tuesday, September 28, 2010

Bookkeeping: Selling SPY Calls

First, a technical note - my "fill" on these SPY 114 Oct calls was horrendous; straight out of a Friday the 13th movie.  The price I received should have been somewhere near $1.70ish but instead it was $1.89... that is roughly a 11% haircut.   I am none too happy about it.

That said, the trade worked out perfectly in terms of strategy - my intent was buying in S&P 1133-1134 area and looking for 10 to 15 points.  Just over an hour later my trade is "done".  Please note I don't care about time frames - to outsiders this is a "daytrade".  Not to me; it was a price target... if it took 4 days, 4 hours or 4 minutes my goal was those 10 to 15 points.  (if I was talking a stock I'd say if it took 4 months, 4 weeks, 4 days or 4 hours but since its an option, due to volatility risk, I usually hold them for hours or at most days)

I'll be taking off my trade in the next few minutes with a nice gain of about 33 cents per option contract (roughly $1.89 to $2.22)  That is 17% for maybe 75 minutes of work.  It should have been closer to 30% if my entry point was anywhere near what it should have been.  Can't do much about it.

p.s. today was a POMO day - I am sure it was just happenstance we shook off a horrid consumer confidence number and rallied just as the Fed was infusing the primary dealers with hundreds of millions.  (indeed today was a small POMO day, usually they send in $3-$5B, today was less than a billion)

No position


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